Treasurys fall after $7 billion auction
Bond prices slip as stocks recover and the government kicks off a $78 billion debt sale.
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| Click the chart for current bond prices and yields. |
NEW YORK (CNNMoney.com) -- Treasurys fell Monday after the government received strong demand for its sale of $7 billion worth of 10-year Treasury Inflation Protected Securities.
It was the first of four auctions happening this week in an effort to sell a total of $78 billion in U.S. debt. The government has held record-sized auctions of Treasurys in recent months to help service a growing deficit and fund its economic stimulus efforts.
Bonds were also under pressure as stocks recovered from a two-week selloff following a better-than-expected reading on the services sector of the economy.
The Institute for Supply Management said its non-manufacturing index rose to 50.9 last month from 48.4 in August. Economists surveyed by Briefing.com had expected a reading of 50, which is the point at which the index reflects expansion.
"The auction went well but there's an emerging bid to the equity market that's pulling attention away from bonds right now," said Kevin Giddis, managing director of fixed-income at Morgan Keegan.
Auction results. Investors submitted nearly $22 billion worth of bids for the $7 billion in Treasury Inflation Protected Securities, or TIPS, sold at Monday's auction. That made for a bid-to-cover ratio, which measures demand, of 3.12. The ratio was 2.51 at the last sale of TIPS in July.
Indirect bidders, a category that includes foreign central banks, bought 43% of the securities.
On Tuesday, the government will sell $39 billion worth of 3-year notes, followed by $20 billion in reopened 10-year notes on Wednesday, and $12 billion in reopened 30-year bonds on Thursday.
Giddis said he expects this week's auctions of 10-year notes and 30-year bonds to go well, but warned that Thursday's auction "could be a challenge" with yields below 4%.
Demand for U.S. debt at recent auctions has been relatively firm, though many analysts worry that prices could soften as the government floods the market with supply. As a result, Treasury prices can be volatile during weeks when the government sells large amounts of debt.
Treasurys fell Friday as investors looked past a weaker-than-expected government jobs report. Despite Friday's decline, the bond market posted its second week of gains last week.
Bond prices: The benchmark 10-year note was down 1/32 to 103-11/32, and its yield held steady from 3.22% late Friday. Bond prices and yields move in opposite directions.
The 2-year note eased 1/32 to 100-7/32 with a yield of 0.87%.
The 30-year bond slipped 10/32 at 108-12/32. Its yield was 4.01%.
The yield on the 3-month bill was 0.1%. 
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